Rent Control Legislations- The Paradigm Shift
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Rent Control Legislations- The Paradigm Shift
Meenakshi Sharma*
The courts these days are flooded with litigations between landlords
and tenants. The landlords fighting litigation for release of their own
property is not a very uncommon sight. There are tenants who are in
possession of properties at a rent of amount as meager as Rs. 2.50/- where
the property could have fetched an amount of more than Rs.50, 000/- at the
same location. It is the landlord who suffers most in this situation. Firstly it
is his property which is trapped in unnecessary litigation without any fault
of his. Just because he had rented his property out to someone in need for an
accommodation seems to have taken away his right to enjoy his own
property and he is thrown away at the mercy of the court to claim a right
which has always been his own. This situation even worsens when the
landlord is a widow, minor or an old aged person depending solely on the
income received from the property in the form of rent. The Rent Control
Legislations governing the same were enacted mainly for protecting the
weak tenants from falling prey at the hands of greedy landlords. But with
time the situation has very much changed. The tenants are no longer a
weaker section of society that would need a legislative shell to protect
them. Too much protection being provided by the legislations to the tenants
had started resulting in getting the landlords in a somewhat disadvantaged
position. The property of the landlord sometimes gets perpetually in the
grab of the tenants without any hope for a return even in pecuniary form.
The application of these rent control legislation need to be addressed with a
new approach having regard to the changed scenario of the society.
WHY RENT CONTROL LEGISLATIONS WERE NEEDED?
The history of legislations relating to rent control in the country would
show that rent control acts were enacted to regulate & control tenancies
with the primary aim to protect the tenants. Because of the scarcity of
accommodation which arose primarily due to the growth of
industrialization and commercialization and inflow of population to the
urban areas, demands for rental accommodation increased, consequently
appreciating landlords' demand for rent. The landlords were found to be in
a position to exploit the situation for their unjustified personal gains which
*
2nd Add. Civil Judge (J.D.), Haridwar
75were consequently detrimental to the helpless tenants who were subjected
to uncalled for litigation against eviction. It thus became imperative for the
legislation to intervene to protect the tenants against harassment and
exploitation by the landlords. For this purpose appropriate legislations were
passed by almost all the States in India with the paramount object of
essentially safeguarding the interest of the tenants. The Rent control laws
enacted by the States drastically curtailed the landlord's power of enhancing
the rent and evicting the tenant. The question whether this curtailment of
landlords' power was justified in law or not was raised in large number of
cases. The challenges were turned down by the courts on the ground that
these restrictions were necessary having regard to the economic condition
of the country at that time. There are also umpteen pronouncements of the
courts which clearly indicate that the tilt of the rent laws was more towards
the tenants than it was intended by the legislations.
The strain of the last World War, Industrial Revolution, the large scale
exodus of the working population to the urban areas and social and political
changes brought in their wake social problems of considerable magnitude
and complexity and their concomitant evils. The country was faced with
spiraling inflation, soaring cost of living, increasing urban population and
scarcity of accommodation. Rack renting and large scale eviction of tenants
under the guise of ordinary law exacerbated those conditions making the
economic life of the community unstable and insecure. To tackle these
problems and curb these evils, the legislatures of the States in India enacted
rent control legislations.
LEGISLATIONS MAINLY FOR THE PROTECTION OF TENANTS
The Rent control Legislations were enacted to provide protection
to tenants against the illegal and unscrupulous eviction by the landlords.
The rights of the landlords in this regard were curtailed to a great extent.
Prohibition of private letting and regulation of rent were a few examples.
The courts also were inclined in favour of the tenants considering them a
sufferer in the situation.
Nootan Kumar vs. Additional District Judge, Banda (1993) 22 ALR
437 (SC)
Having prohibited private letting of any building the legislature has
imposed a ban on the occupation of such building either on behalf of the
76tenant or the landlord vacating the same otherwise than in pursuance of an
order of allotment or release U/S-16. Such a ban on occupation of a vacant
building without an order of allotment or release was imperative in order to
completely check the private letting thereof by the landlord. An analysis of
the legal position makes it clear that the legislature has attempted to use all
possible safety valves so that unscrupulous landlords cannot defeat the
purpose of the Act by resorting to private letting.
The courts used to adopt a strict approach while interpreting the
“bonafide need” as given in Sec 21 of U.P. Act 13 of 1972. The landlord has
to prove his bonafide need in order to get his property released. Mere
assertion that he needs his property back was not considered a proper cause
to pass a release order.
Muthulal vs. Radheylal 1974 SC 1596
Mere assertion of the landlord that he requires the accommodation is
not decisive. The word “required” signifies that mere desire on the part of
the landlord is not enough but there should be an element of need and the
landlord must show the same as the burden of proof is upon him that he
genuinely requires the accommodation.
REFORMS IN THE LEGISLATIONS
Over the period, it was found that the owners preferred to keep their
accommodations vacant & were not willing to let the same as because of
such Rent control laws they were not getting return for their investments in
constructions. Providing too much protection to the tenants under these
rent control legislations was having an adverse effect on the interests of the
landlords. Thus, various representations had been received by the govt.
about the hardships and injustice caused by the provisions of the rent act.
An Economic Administration Reform commission set up under the
chairmanship of Mr. L.K. Jha went into this question and its report
presented to the govt. in 1982, suggested a number of changes in the Rent
control laws. The Commission pointed out that freezing of rentals at old
historic levels, the excessive protection of tenancy rights and extreme
difficulty in recovering possession even for the owner's own use had :-
(a) Hit hard the house owner of modest means;
(b) Depressed property values and affected adversely the
revenues of municipal bodies and the State and Central govt;
77(c) Imposed onerous burdens on the administration and
the judiciary and led to large number of pending cases;
(d) Rendered investment in housing for rental unattractive, inhibited
the letting out of available accommodation, brought about
deterioration of the existing stock of housing through neglect of
maintenance, and thus have aggravated the acute scarcity of
accommodation for hire;
(e) Encouraged various malpractices and abuses such as on-money
(pugree), partial receipts of rent, capital consideration (in black
money) for tenancy transfers etc.; and
(f) In general tending to protect the haves against the have-nots, i.e.,
the tenant (even if affluent) as against the landlord (even if not so
affluent) and the sitting tenant as against the prospective tenant
who was looking for accommodation on rent.
The Commission in the background of aforesaid findings made inter
alia the following recommendations:
(i) There is a case for confining rent control to relatively modest
premises occupied by the less affluent though it is difficult to
draw a suitable dividing line for the purpose. We would urge the
State Governments to consider this possibility.
(ii) Considering the urgent need for the new housing and as an
incentive for the construction of houses, there should be an
exemption from rent control on all the new construction for a
period of five years from the date of completion.
The National Commission on Urbanisation also made a report in
which following points were made:
(i) Housing has been recognized as a basic need, ranked next only to
food and clothing. But resources allocated and policies pursued
have not yielded the expected results. Forty million people
(about one fourth of the population of India) live in slums and
under conditions of multiple deprivation illegal land tenure,
deficient environment and kutcha shelter. In addition a
significant number live in inner city neighbourhood with
decaying buildings and deficient services. The supply of new
shelter units is not adequate to meet incremental needs leave
78aside the backlog. Nearly sixty percent of the households cannot
afford a conventional pucca house and the lowest 10-15 % cannot
afford even a serviced site. Furthermore given the resources
constraint it is not possible to provide new pucca houses for all in
the near future. The emphasis of housing policies therefore has to
be on increasing shelter supply, improving and upgrading slums
and conserving the existing housing stock.
(ii) There are always some households which are either not interested
in owning a house or just cannot afford to own one. For such
households rental housing is the only option. The main factors
inhibiting investment in rental housing and in the maintenance of
rental stock are the various rent control laws.
The Commission had made extensive recommendations regarding
reforming rent laws in its interim report.
AMENDMENTS IN THE UP ACT XIII OF 1972
Even the legislatures took cognizance of the fact about the change in
circumstances in the society & amended the Rent Control Act to limit the
same to economical weaker section by reducing its applicability
(i) to the accommodations where the agreed rent is not more than Rs.
2000/- per month & exempted the accommodations agreeably
fetching rent more than Rs. 2000/- per month from the ambit of
Rent Control Act.
(ii) With advent of global business in India, a provision for
exemption was also included to exempt accommodation let out to
MNCs from Rent Control Act for the benefit of the landlords.
(iii) It was also observed the Rent Control laws were hampering the
use of the properties of religious & charitable institutions as such
exemption was also provided to the accommodations owned by
religious & charitable institutions.
(iv) Above all the age of accommodation which attracted Rent
Control Act was increased by amendment from initial 10 years
to 20 years & now it is 40 years in UP & Uttarakhand.
Such & other such incentives were thus extended to the landlord to
lure them to throw their vacant properties for letting to meet the scarcity of
urban accommodation.
79This change in legislation not only woke up the society but also
changed the views of the courts to become liberal towards landlords
ironically against the tenants who become parasite & start considering
themselves as owners on petty rent. With the brief exception under section
21(8) of UP Act XIII of 1972 there is no provision for any enhancement of
rent. It is my ardent view that this subsidy of Rent Control Act should also be
wiped as is there effort to finish of the other subsidies.
PRESENT DAY POSITION IN COURTS
With the passage of time the position of tenants in the society has
undergone a sea change. The social scenario in the light of which the Rent
Control Legislations were enacted does not exist anymore. The legislations
and the courts' pronouncements have been providing too much protection to
the tenants thus making the landlords getting trapped in a disadvantaged
position with their properties not fetching the potential returns.
The courts are coming out of their comfort zone now in granting relief
to the landlords thus breaking the stereotype of being the “tenant
protectors”. For example, while deciding on the question of “bonafide
need”, the courts are now adopting the view that the landlord is the best
judge of his need and no one not even the court can dictate the landlord to
use his property in any particular manner. The courts are now quite liberal in
their approach making clear that even having an alternative accommodation
is no ground for denying the bonafide need of the landlord.
KamlaTripathi vs. KanchanAggarwal&anr. 2007 (1) ALJ 352
Sec 21(1)(a) Expln 1 of UP Act 13, 1972 prescribes for the bonafide
need of the landlord. Where the tenant purchased a plot, constructed flats on
it and sold them later, it clearly shows that alternative accommodation was
available to him. Therefore, it is not open for the tenant to challenge the
bonafide need and comparative hardship of landlord by taking advantage of
fact that landlord owns any other house besides premises in dispute.
Raghvendra Kumar vs. Firm Prem Machinery & Co. (2000) 1 SCC 679
M.P.Accommodation and Rent Control Act, 1961 as regards with
bonafide requirement of landlord the settled position of law, held, is that
landlord is the best judge of his requirement for residential or business
purposes and has complete freedom in the matter.
80Even the long period of tenancy is not considered a sufficient ground for
denying any relief to the landlord. If the tenancy has existed for a long
period of say more than 50 years that is not a ground for depriving the
landlord from enjoying his right to his property.
Shamshad Ahmad and ors.vs. Tilak Raj Bajaj 2009 (1) UAD 64 (SC)
UP Act 13, 1972 comparative hardship of landlord and tenant when
no attempt being made by tenant to find out alternative accommodation, it
leads to an inference that the tenant did not make such attempt for the fact
that he might have to pay more rent. Such consideration of hardship of
tenant would not preclude the landlords from getting possession of the suit-
shop once they have proved the genuine need of the property. If the
requirement of the landlord is bonafide and reasonable even the longevity
of tenancy of fifty years should not be a ground for depriving the landlord
for doing business.
The courts even went to the extent of holding that not even courts can
dictate the landlord as to how and in what manner the property is to be used.
It is solely the prerogative of the landlord.
Prativa Devi v. T.V.Krishnan (1996) 5 SCC 353
Delhi Rent Control as regards bonafide requirement of landlord, the
landlord is the best judge of his residential requirement. Whether an
alternative accommodation was actually available would depend upon
landlord's right to such accommodation.
“landlord is the best judge of his residential requirement. He has
complete freedom in the matter. It is no concern of the courts to dictate
to the landlord how and in what manner he should live or to prescribe
for him a residential standard of their own. There is no law which
deprives the landlord of the beneficial enjoyment of his property.”
The court emphasized the need for social legislations like the Rent
Control Act striking a balance between rival interests so as to be just to law.
“The law ought not to be unjust to one and give a disproportionate benefit
or protection to another section of the society.”
While the shortage of accommodation makes it necessary to protect
the tenants to save them from exploitation but at the same time the need to
protect tenant is coupled with an obligation to ensure that the tenants are not
81conferred with a benefit disproportionately larger than the one needed.
Socially progressive legislation must have a holistic perception & not a
short sighted parochial approach. Power to legislate socially progressive
legislation is coupled with a responsibility to avoid arbitrariness and
unreasonabilty. A legislation impregnated with tendency to give undue
preference to one section at the cost of constraints by placing shackles on
the other section, not only entails miscarriage of justice but may also result
in constitutional invalidity (Malpe Vishvanath Acharya vs. State of
Maharashtra and anr (1998) 2 SCC 1).
Speaking in the context of reasonable requirement of landlord as a
ground of eviction, the court guarded against any artificial extension
entailing of language so as to make it impossible or extremely difficult for
landlord to get a decree for eviction. The court warned that such a course
would defeat the very purpose of the Act which affords the facility of
eviction of the tenant to the landlord.
The Rent Control legislations are heavily loaded in favour of the
tenants treating them as weaker sections of the society requiring legislative
protection against exploitation and unscrupulous devices of greedy
landlords. The legislative intent has to be respected by the courts while
interpreting the laws. But it is being uncharitable to legislatures if they are
attributed with an intention that they lean only in favour of the tenants and
while being fair to the tenants, go to the extent of being unfair to the
landlords. The legislature is fair to the tenants and landlords both. The
courts have to adopt a reasonable and balanced approach while interpreting
rent control legislations starting with an assumption that an equal treatment
has been meted out to both the sections of the society. In spite of the overall
balance tilting in favour of the tenants, while interpreting such of the
provisions as take care of the interest of the landlord the court should not
hesitate in leaning in favour of the landlords. Such provisions are engrafted
in rent control legislations to take care of those situations where the
landlords too are weak and feeble and feel humble. (Bega Begum vs. Abdul
Ahad Khan 1979 AIR SC 272)
MODEL RENT CONTROL LAW
The National Housing Policy, 1992 ('NHP') of the Central
Government envisages amendment of the State Rent Control Laws for
82bringing uniformity in their application throughout the country. The
Central Government has formulated a suitable Model Rent Control Law
incorporating the features outlined in the policy paper. On the basis of series
of consultations with State Governments and various experts, the Ministry
of Urban Development had prepared a paper suggesting the basic features
of a model rent control law. The policy paper was considered in the Chief
Ministers Conference, where the broad frame work of the Model Rent
Control Legislation was endorsed.
DRAFT MODEL TENANCY ACT 2015-A BALANCED APPROACH
(i) The Draft Model Tenancy Act, 2015, is an improvement on its
obsolete predecessor; it will make things much easier for
landlords who were short-changed by the previous law. Property
owners have been skeptical about renting out their houses as they
fear that their tenants may refuse to vacate on time.
(ii) The new Draft seeks to balance the needs of both tenants and
landlords. For instance, as per the provisions of the Rent Control
Act, rent of properties were capped and landlords could not raise
rents despite the jump in property rates. Thus, many tenants
ended up paying a paltry rent of about Rs 100 despite living in
prime locations. The Draft proposes reforms that will enable
landlords to charge market rates and make it easier for landlords
to evict tenants who default on rent without getting into long
drawn out legal proceedings.
(iii) The Draft also has provisions to protect the interests of the
tenants. Currently, the security deposit paid by tenants is an ad-
hoc amount. As per the draft, the security deposit cannot exceed
three times the monthly rent. Besides, tenants can claim a
reduction in rent if the quality of services deteriorates.
(iv) Among the many reforms included in the Draft are the proposal
for an independent authority for registration of all tenancy
agreements and a separate court for rent related disputes and
litigation cases. The rent agreements need to be registered with
the Rent Authority. Further, the Draft has proposed that all
disputes will be heard at the Rent Courts set up by the states. The
Civil Courts will no longer hear rent related cases
83. (v) The new draft on the other hand will ensure that landlords are able
to charge market rates for their residential or commercial
properties, get the rents revised periodically, and also get their
premises vacated easily without getting into long-drawn legal
proceedings. With these changes, a large number of properties
lying vacant can be used to not only generate additional income
for home-owners, but also solve the housing problem in the
country.
(vi) Another plus point for tenants is that they can claim a reduction in
rent if the quality of services available to them deteriorates in any
way.
But an increased willingness on the part of property owners to rent out
their properties might not happen overnight. A lot will depend on the
execution of the rules mentioned in the Act to help landlords raise the rent
and get trouble-making tenants evicted.
A LONG WAY TO GO
As compared to the Rent Control Enactments around the world, the
Rent Control legislations in India have a long road to travel ahead. To be at
par with the developments in this area internationally there is a dire need to
bring uniformity in the rent control legislations of different states and bring
about a common infrastructure for implementation of the same. Below are
some suggestions that can be brought into practice to fulfill the main
objective of the rent Control Legislations:
· Online registration and search facility for those who want to
register their houses for rental purpose and those who are in need
for an accommodation.
· Cap on the tax on rental earning can be introduced to encourage
the landlords to rent out the properties.
· Unpaid rent can be insured like proposed in new Rent Control
Legislation in France. Both tenants and landlords will pay into a
government run insurance fund against unpaid rent. If a tenant
defaults, landlords will no longer have to chase them through the
courts, but simply apply to the fund for reimbursement. This fund
will pay the landlord upfront, and then investigate the claim
84themselves. If the tenant has defaulted due to unemployment,
illness or low income, they'll receive rent relief (a system already
in place in France). If they're just negligent or taking advantage,
however, they'll get sued.
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